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It’s No Joke: British Gas Leads the Way In UK’s Smart Home Market

by David Mercer | Jul 16, 2014

Like most former incumbent or monopoly utilities or telecoms providers, the UK’s British Gas suffers perhaps unduly from a residual image problem associated with the “bad old days” and remains an easy target for lazy comedians. Not that everything in the modern utility market garden is necessarily rosy, but it certainly has changed over the last decade or so. UK households once had the “choice” of using gas, from British Gas, or electricity, from the local monopoly supplier: most took both. Now there are six major providers and a number of much smaller competitors, all of which offer a variety of energy and other services.

Like many utilities British Gas, part of the international Centrica group, has had its eye on smart home business opportunities for some years. Unlike most others, it is achieving significant commerical success and is an early leader in this rapidly growing market. As we report today, nearly 100,000 UK homes are now using British Gas’s Hive energy control and monitoring service. Using AlertMe’s smart home platform, Hive currently allows users to control the temperature of their heating and water systems using apps on smartphones and tablets or via a web interface. The Hive system currently comprises a wireless thermostat, wireless hub (connected to the home’s broadband router) and a wireless receiver connected to the home’s boiler. The Hive app is available for Android and iOS but unfortunately not for the UK’s three million Windows Phone users (they are encouraged to visit hivehome.com on their phone’s browser instead). Installation and the devices are being sold as part of a £199 package and there are no additional subscription fees.

As Hive’s Tom Guy admitted to me at a recent London conference, the company is in a process of constant experimentation as it learns what works and what doesn’t. He recognised that overcoming low awareness was a major battle in building this new market, which is reflected in the high profile advertising campaigns Hive has undertaken in recent months. Guy said he was “very pleasantly surprised” at Hive’s high usage rates – 50% of owners are using the Hive app on a daily basis. Hive’s API will be opened up in due course, and we can expect a variety of other smart home applications and services to become available.

From a business model perspective as well it seem as though British Gas is in a learning phase. There appears to be little margin in the current £199 deal and no ongoing revenues at the moment. But BG is getting its technology and services into homes, whether or not they are current BG energy customers, and this could eventually lead to new revenues from other smart home-related products or other services. It may well also help to lock in BG energy customers, who, like all “multiplay” households, should be less likely to churn to alternative providers.

BG’s lead is being hotly pursued by Npower, which has formed an alliance with Google’s Nest, and E.ON, which has been trialling smart home services in Milton Keynes. In other European markets, while many trials have taken place, wider commercial rollouts by utilities have been less noticeable.

 So why has the UK proved to be fertile territory? My colleague, Bill Ablondi, one of the industry’s foremost smart home experts, believes that the UK is the most competitive energy market in Europe and that this is now transferring to the smart home environment. By contrast, continental markets tend to be dominated by “big and slow” players like EDF, which might now only be planning for 2020 to launch smart home products. And other European utilities tend to be focused on energy management as the key issue: BG, by contrast, like Nest and others, have learnt that consumers are not much interested in that: they want cool apps and gadgets and appear to be prepared to pay for them. Europe’s energy industry should take notice.

David Mercer

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